Innovation will help Americans improve their financial health

In addition to a multitude of innovations, the Industrial Revolution was significantly impacted by the railroad. The Iron Horse allowed goods to travel in days across the American continent that would previously have required months, fueling the factories and workers in American cities that turned this nation into an economic powerhouse.

We stand at the dawning of a new, decidedly 21st century revolution in the financial services industry: the financial technology revolution.

Through it, American consumers will be enabled and empowered to use powerful third-party applications to improve their financial well-being. The engine powering the financial technology revolution is consumer-permissioned financial data. It is the ability of any American to access and share their financial data to fuel the technology applications that can help them improve their financial health.

{mosads}The need for innovation in the financial services industry to empower consumers is heightened and driven by a fundamental and worsening savings crisis in the United States. A recent report from Bankrate found that almost six in 10 Americans wouldn’t have enough savings to cover an unplanned expense of $500.

Last year, the Economic Policy Institute determined that “nearly half of all families have no retirement savings at all,” and the median retirement savings in the United States is just $5,000—the smallest it has been since the mid-1990s.

Consistently reliable access to real-time, up-to-date and accurate banking and other financial transaction information is incredibly valuable to enabling consumers to improve their financial state. By allowing consumer permissioned access to their financial transaction data, Americans can utilize a vast suite of solutions and advisory services specifically designed to improve consumer financial wellness.

These tools cover a wide range of needs from simple budgeting programs, to optimizing fixed incomes, to informing sophisticated investment management tools or their financial advisor. In addition, these tools support consumer objectives of evaluating the benefits of the financial products they qualify for, avoiding attempts to spend money that they do not have, and escaping incurring late fees or penalties or the need to entangle themselves in predatory loan products.

The Consumer Financial Protection Bureau has rightly recognized that “access to digital financial records is critical,” and it is “gravely concerned by reports that some financial institutions are looking for ways to limit, or even shut off, access to financial data rather than exploring ways to make sure that such access, once granted, is safe and secure.”

As we stand on the precipice of the financial technology revolution, the CFPB’s perspective, which asserts the right of the consumer to use their own information to take advantage of important financial tools, is precisely the right one.

As the new Congress and the new administration begin their work in Washington this year, a newly-formed industry group comprised of some of the most recognized companies in the financial technology sector stands ready to work with them to support consumers’ right to innovative products and services that can improve their financial well-being.

The Consumer Financial Data Rights group, which includes companies such as Envestnet Yodlee, Kabbage, Affirm, Betterment, Digit, Ripple, and Varo Money, among others, was launched earlier this week. The group will seek to engage with policymakers to encourage safe and secure, consumer-permissioned open data access.

As we wrestle with how best to design and build our financial technology revolution “railroad” here in the United States, governments in Singapore, the United Kingdom and Europe, among others, are already laying their tracks with open banking and application programming interface (API) standards that are transforming their banking sectors and empowering their consumers.

Asserting the right of American consumers to have real-time, unfettered access to their financial data, as well as the right to permission that data to responsible third parties, will both help improve Americans’ finances and ensure the continued strength of our financial services sector.

Steven Boms is vice president of government affairs for Envestnet Yodlee, a data aggregation and analytics company.

The views of contributors are their own and are not the views of The Hill.